The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1885-1921, 1887-03-23
THE HAWAIIAN LOAN.

ADyERTIsER-Sir: l have before me copy
of your able journal of December 28th, IN
which l find an article quoting my cable
gram to my friend Mr.. S. NJ. Damon, an
nouncing the successful issue OF the Ha-
waiian loan in London, with your COM
ments thereupon and some rather strong
criticisms upon those who were concerned
in that negotiation, which you were of
course at perfect liberty to make.
| am quite sure. from my personal
| knowledge of your fairness and Impartial
| itv, and your high character as pubic
! journalist, that your statements were made
! in good faith, and in the most con-
! scientious conviction of their truth, and /
am equally certain that you will permit
me the opportunity of pointing out one or
! two errors which you have without doubt
Internationally made, and which have
naturally led to mistaken conclusions, cal
| culated to place in an invidious and I'M
| merited light the character and actions OF
| those who were concerned in facilitating the
! successful issue of the loan.
You infer that because the loan advanced
/ to premium of per cent-that is 105, or
! Z per cent above the price of issue-that
| therefore, the syndicate who took the loan
| firm, before there was any certainty that
! dollar of it would be subscribed by the pub
| lie, made proht OF IA per cent. This Is
| doubly a mistake. Every shilling of the
| loan was issued to the public at 90, in ac-
cordance with the terms of the prospectus.
! The Stock Exchange premium represents
the profit which willing buyers, or specu-
! lators for a rise, are prepared to pay for an
article for which demand has been
created which appears to be greater than
| the available supply. Such premium is an
uncertain and fluctuating factor, as many
| know to their cost. 1t is subject to many
influences. And even in the young life of
the Hawaiian loan it has been as high as
| 81 per cent, and as lew as ~ per cent.
In such a premium a syndicate has no
share, because, although each member is
bound to subscribe for the amount he has
! guaranteed, and must take it and pay for
! it if the loan does not float, yet it is a con-
dition that such applications receive no
allotment if the public subscribe for the
stock. L happen to know, in the case of
the Hawaiian loan, not a shilling was al
| lOtted to the syndicate upon the applica-
tiOns named. The reasons are quite patent.
One of the most stringent rules of the
Stock Exchange is that no stock or bond
| receives official sanction or recognition UNI
| less it has been subscribed by and allotted
to the public, and so strict is this law that
the house of issue must furnish to the COM
mittee of the Stock Exchange a complete
| list of the names, addresses and the
amounts allotted to each subscriber before
ole al nfafin *
granted. The object is obvious and just
1t demonstrates in the first place that a
stock possesses so much intrinsic merit
that it has commanded public confidence
and in the second place that it is not held
| in few hands and SO furnish an oppor-
tunity for manipulation contrary to the
| interest both of the public and the Stock
Exchange.
Having now, hope, fairly established the
| fact that the syndicate made no more than
! their stated commission, come to your
criticism as to the amount of that commits
sion and your belief that the Government
could, or should, have done better. You
say that the usual COMMISSION tor floating
national loans on the London market is
one-half of one per cent. I am not pre-
pdT0u 10 Say GDdG no HdGlOHdl IOdil was
ever foated for so small a commission.
Probably if Great Britain, France, Ger
many or the United States wanted loan
to-day they might get it done for that fig
ure; but these Governments seldom come
into the market for less than ten millions
sterling, and it is an easy calculation that
half per cent on fifty millions of dollars
is much better than per cent on one
million. Many of the most important
items of expense are the same in each case,
and the labor and machinery employed
are identical. Besides there are other OBJ
vious differences between loan for either
of the Governments named and for Ha-
wall coming for the first time into a mar
ket where, except to comparatively few
people, her reputation and credit are abso-
lutely unknown.
But for the satisfaction of all who are in
terested, that the syndicate for the Ha-
waiian loan dealt with commendable mod
Grafton, and that the Government did ex-
ceedingly well and was not exploited in
the negotiation, l have taken some pains
to collect reliable information on the sub
iect of national loans and the commissions
and expenses paid by the Governments
contracting them, as well as the conditions
upon which the money was lent, which l
l will now place before you, merely pre-
missing that my information is derived
from authentic sources, and may be relied
upon as absolutely correct.
the Chinese Imperial Government per
cent loan was issued in 1885 for Ell sos, 900,
the price of issue was SO per cent secured
by special hypothecation of customs, for
which receiver on the part of the bond
holders was appointed and provision was
embodied in the act, that holders of the
bonds might pay them for customs duties.
The commissions and expenses paid by the
Chinese Government were as follows: Com
missions in China, per cent; commissions
in London, 211 per cent; the expenses of
issuing the loan amounted in addition to
nearly 5A per cent. The Chinese Govern
ment therefore netted less than eighty
three cents per dollar on this per cent
loan. The Chinese Government issued a
further loan in 1885 for FL 100000. this
time at 6 per cent interest. The price of